In the November of year 2006, Alec Berg, a successful hedge fund manager, must decide whether to invest in the initial public offering (IPO) of the Hertz Corporation. The LBO sponsors had borrowed an additional $1 billion on top of the buyout financing to pay a special dividend in June 2006 to themselves. This loan would be refunded with the IPO proceeds and any remaining profits from the IPO would go to the sponsors. The IPO generated widespread criticism with respect to the rate with which the IPO was ran and the payment of special dividends.
Berg must assess whether at $15 per share, Hertz offers an appealing investment for this fund. The case provides the required info for students to analyze the patrons' returns on their investment in Hertz and the attractiveness of the offer price that is $15 to public investors. The case also offers a chance for pupils to discuss the controversy surrounding the payment of special dividends and the claim that private equity sponsors invest with a long-term outlook that creates value for the business.
PUBLICATION DATE: March 10, 2009 PRODUCT #: UV1409-HCB-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
Related Case Solutions & Analyses:
Aruna Roy and the Birth of a Peoples Movement in India
ETrade Securities Inc.
Breezy Boat Company
The Cost of Capital: Principles and Practice
Pacific Century CyberWorks: The Road to Privatisation
The Weekend that Changed Wall Street
BlackRock Money Market Management in September 2008 (B)
How Institutional Investors Think About Real Estate
Midland Energy Resources, Inc.: Cost of Capital (Brief Case), Spanish Version
Embraer S.A.
